Federal Judge Denies Bid To Force Feds To Resume ACA Subsidies

California Attorney General Xavier Becerra led the lawsuit, filed by 18 states and the District of Columbia, seeking an emergency restraining order compelling the Trump administration to resume the Obamacare payments. (Bill Clark/CQ Roll Call)

Update: This story was originally published on Oct. 24, 2017. It was republished on Oct. 25.

The ruling came in a lawsuit filed by 18 states and the District of Columbia, led by California Attorney General Xavier Becerra. It sought an emergency restraining order compelling the Trump administration to resume the Obamacare payments, which would have totaled $7 billion this year.

In his ruling, U.S. District Judge Vince Chhabria wrote that “the emergency relief sought by the states would be counterproductive.” He said the vast majority of states have already prepared for the termination of the payments and already “devised responses that give millions of lower-income people better health coverage options than they would otherwise have had.”

Earlier this month, the Trump administration ended the so-called cost-sharing subsidies that compensate insurers for discounts given to low-income consumers to help cover their out-of-pocket expenses under policies sold on the ACA marketplaces. Officials argued that the subsidies are illegal because they have not been approved by Congress.

These subsidies are different from the tax credits many consumers get, depending on their income, to pay Obamacare premiums.

Chhabria said whether the funds were properly appropriated remains an open question as the lawsuit continues. His decision dealt only with the restraining order.

Becerra vowed to continue the legal battle to reinstate the payments.

“The fight for affordable healthcare moves forward,” Becerra said in a statement. “The actions by the Trump Administration undermine critical payments that keep costs of healthcare affordable for working families. The judge made clear in his ruling that the ACA is the law of the land. Without an emergency order halting the Trump action, swift action in this litigation becomes even more compelling.”

The ruling was expected. Chhabria expressed skepticism Monday that Trump’s decision to halt the subsidies would cause consumers immediate harm, as California and many other states claimed in the suit.

Since assuming office in January, Trump has repeatedly threatened to stop the cost-sharing subsidies. But he held off while Republicans in Congress were working to replace the ACA.

Responding to the uncertainty, a number of states have allowed insurers to raise their premiums. California earlier this month ordered insurers to add a surcharge to some policies next year, to offset the potential loss in federal funding and keep the individual insurance market stable. The 12.4 percent surcharge was added to silver plans only, the second-least-expensive tier.

“California is doing a really good job in responding to the termination of [cost-sharing reduction] payments in a way that is avoiding harm for people and actually benefiting people,” said Judge Chhabria.

He said that the vast majority of states have “seen the writing on the wall” and chosen to respond by increasing premiums for silver plans. That, in turn, will force the federal government to give higher tax credits to most consumers, so they won’t feel any financial pinch.

Under intense questioning by the judge, California Deputy Attorney General Gregory Brown acknowledged that California has done a lot to mitigate the harm to consumers. But he said the administration’s actions are destabilizing the exchanges and the individual insurance market, and causing chaos for states and consumers just eight days before enrollment begins Nov. 1.

Some experts and states are concerned jumpy insurers will bolt from the market and leave some regions with minimal or no choices for coverage. However, a bipartisan bill in Congress would restore the cost-sharing subsidies and aims to stabilize the insurance markets. But it’s not clear the bill will muster the support it needs to pass both the Senate and House or whether Trump would sign it.

In California, 1.4 million people buy their own coverage through the state marketplace, and 90 percent receive federal subsidies that reduce what they pay.

During the hearing, Chhabria read from a Covered California press release that predicts how the changes will affect consumers in 2018. It notes that even though silver plan premiums will rise as a result of the surcharge, the federal tax credits will also increase to cover the rise in premiums. That would leave 4 out of 5 consumers with monthly premiums that stay the same or decrease.

The judge also said ruling in favor of the restraining order would mean insurance companies could essentially “double collect” — benefiting from both the premium increases from the surcharge on silver plans and the cost-sharing subsidies.

Brown said a restraining order to resume the cost-sharing payments would bring back the status quo. If insurance companies double collect, the state would compensate by reducing rates down the line, he said.

“We’re not looking to give insurance companies a windfall … but the stability is important to insurance companies,” he said.

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Federal Judge Denies Bid To Force Feds To Resume ACA Subsidies

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